Per capita income expected to grow by 3.2 percent in the current fiscal year, reaching $735

Domestic savings to be 9.98 percent of GDP (8.62 percent of GDP in 2010/11 and 11.5 percent of GDP in 2009/10)

Consumption at 90 percent of GDP

Agriculture sector to grow at 4.86 percent, thanks to increased production of cereal crops and other agri produces. Paddy production to go up 13.72 percent. Production of fruits, meat and dairy products, and other livestock products are estimated to go up by 5.13 percent, 3.01 percent and 5.99 percent, respectively

Contribution of agriculture and forestry sector to GDP is expected to fall to 34.78 percent this fiscal year, from last year´s 36.54 percent.

Manufacturing sector´s (projected to expand by mere 1.28 percent) contribution to GDP is also expected to remain unchanged at 6.17 percent. The low growth rate is expected due to a fall in production of clothing items and shoes made of fabric, leather and synthetic, plywood and dairy products.

Construction sector which is expected to contract by 0.07 percent this fiscal year. Its contribution to the total GDP is also expected to fall to 6.73 percent this fiscal year from 6.93 percent of last fiscal year.

Contribution of wholesale and retail trading to the GDP is expected to go up to 14.24 percent from 14.16 percent of previous year, with expansion of the sector by 3.79 percent.

Gross national disposable income to stand at Rs 1.97 trillion this fiscal year, up from Rs 1.68 trillion of last year.

“The claim of economic revolution by this government is pure hogwash. The economy is stuck in the same mess as it was before. The government has done nothing substantial to put it on the path of high growth, let alone address the short term constraints. The recent good news about bumper agriculture production, improved reserves and BoP surplus has nothing to do with policy changes by this government. Importantly, improvement in these indicators alone does not indicate an improved macroeconomy set to welcome more investment and ready to brace growth rate of over 5 percent.”

Domestic savings are too low, which also hints at the low level of domestic investment. FDI inflows are not that encouraging. Let us hope that there will be substantial investment commitment (forget about immediate disbursement) during NIY 2012/13.

BoP and current account surpluses and huge forex reserves don’t mean anything if these are due to external factors rather than internal factors driven by high industrial production, high exports and a gradual move toward structural transformation.

Budget deficit will widen this year and next year as well, thanks to payments to voluntarily retired PLA fighters and expenditure growth being higher than revenue growth.

The increase in employment in services sector (and its contribution to GDP) is not related to domestic sources of demand at the core. The huge remittance inflows have increased purchasing power of people and the demand for imported goods (both durables and nondurables). It means a robust trading business, as signified by rising imports (apart from petroleum products). It also means an increase in growth of retail services.

Good sings are emerging though: NIY 2012/13 should be a milestone if it is run smoothly with adequate manpower, ideas and funds. There is no room for satisfaction from partial success like that during NTY 2011. The US$.18 billion West Seti hydropower project is a good start. More credible foreign firms should be given green light to start big hydropower projects (no hullaballoo on grounds of nationalism and neocolonialism, please). Target should be on three fronts: agro-processing industries to propel interim period structural transformation, big infrastructure projects to address binding constraints to growth, and employment-generating activities (both labor intensive and sophisticated activities) to entice youths.

Prevailing disenchantment among Maoist combatants on integration, which suddenly raised the number of voluntary retirements, has immediately inflated State´s liability, forcing the government to arrange additional Rs 2 billion from initial calculations of around Rs 5.75 billion to send the combatants home. Considering the initial estimates, Ministry of Finance (MoF) had released Rs 1.97 billion to Peace Ministry to initiate the voluntary retirement of 7,371 who chose it initially. But amid turn of situation, MoF released additional Rs 1.50 billion over the past few days to manage the cost. “We released Rs 1 billion on April 12 and also disbursed additional Rs 500 million on April 15,” said Finance Secretary Krishna Hari Baskota. He informed Republica that MoF managed the fund from budget allocated under miscellaneous heading and also by pooling fund from different ´not so important´ headings. But at the same time he added, the release has exhausted all the fund MoF had at its disposal.

With UCPN Maoist pushing hard for integration of 6,500 combatants in the Nepal army, the government had calculated that just around 10,550 combatants would opt for voluntary retirement. Furthermore, as 9,705 combatants continued to stay in the cantonment eyeing their chances of integration, the government had estimated it will need only around Rs 4 billion to start with for integration. Following such calculation, MoF had immediately disbursed Rs 1.97 billion to the Peace Ministry, which was half of the total retirement cost, for fulfilling the liability in two annual tranches as promised. However, when the integration process actually began, 13,671 combatants have already chosen to go for voluntary retirement by Tuesday.

About

Worked as researcher at SAWTEE; National consultant at Ministry of Commerce & Supplies, Government of Nepal; FAO, UNDP and CIM, GIZ among others; Was Op-Ed Columnist at Republica, December 2008- June 2012

Former Junior Fellow for Trade, Equity & Development program at Carnegie Endowment for International Peace, Washington, D.C. I am interested in trade policy, economic growth, human development and social protection.

I regularly blog on issues related to economic development, trade policy, public policy, and development in the developing countries.

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